Superior Bank of Chicago
Encyclopedia
The Superior Bank FSB was a Hinsdale, Illinois
-based Savings and loan association that collapsed in July 2001
with some $2.3b in assets.
, which made generous arrangements for the takeover of several failed thrifts. The bank was a 50-50 partnership between the Pritzker's jointly (the elder Jay
, Penny
and Thomas
) and real estate investor Alvin Dworman, who ran Superior from his New York office after Pritzker's death in 1997. The Pritzkers and Dworman bought the failed Lyons Federal for the relatively modest price of $42.5 million, with each using a shell corporation to control half of Coast-to-Coast Financial Corporation (CCFC), a holding company created to own Superior.
,
George Kaufman, a finance professor at Loyola University Chicago called Superior's failure "a tale of gross mismanagement," adding that
"[Superior] was engaged in relatively unethical practices, fancy-footwork accounting, playing it very close to the edge."
Kaufman says many share in the blame for the mess-the bank's managers, directors, and auditors, as well as banking regulators-but he also wonders how the Pritzkers, as co-owners, could have allowed it to happen. "One of the great mysteries to me is what the Pritzkers were up to, why they took these chances," he said. "It makes no sense given their wealth and visibility."
against one-time board chairwoman Penny Pritzker
, her cousin Thomas Pritzker, Dworman, other bank principals and Ernst & Young. Plaintiffs’ attorney Clint Krislov claimed that those who controlled Superior induced depositors to put money in the bank, “corruptly” funneling money out of the bank to “fraudulently” profit the owners.
The lawsuit, Courtney v. Hallerin was an initially filed under a district court which dismissed the claims; the appeal was argued before the 7th Circuit of the United States Court of Appeals
on September 25, 2006. In her May 7, 2007 opinion, Judge Wood
affirmed the lower court's decision.
Hinsdale, Illinois
Hinsdale is a suburb of Chicago, Illinois; it is located partly in Cook County and mainly in DuPage County in the U.S. state of Illinois. The population was 17,349 at the 2000 census. The town's ZIP code is 60521. The town has a rolling, wooded topography, with a quaint downtown and is a 30-minute...
-based Savings and loan association that collapsed in July 2001
with some $2.3b in assets.
Synopsis
Superior opened in 1988 under conditions created by the Federal Home Loan Bank BoardFederal Home Loan Bank Board
The Federal Home Loan Bank Board was a board created by the Federal Home Loan Bank Act of 1932 that created and oversaw the Federal Home Loan Banks also created by the act. It was superseded by the Federal Housing Finance Board and the Office of Thrift Supervision in the Financial Institutions...
, which made generous arrangements for the takeover of several failed thrifts. The bank was a 50-50 partnership between the Pritzker's jointly (the elder Jay
Jay Pritzker
Jay Arthur Pritzker was an American entrepreneur and conglomerate organizer.-Biography:Pritzker was born in Chicago, Illinois, the son of Fanny and A. N. Pritzker. His brother was Robert Pritzker...
, Penny
Penny Pritzker
Penny Sue Pritzker is an American business executive, and a member of the Pritzker family of Chicago, one of America's wealthiest business families...
and Thomas
Thomas Pritzker
Thomas Pritzker is a member of the wealthy Pritzker family. He is the Chairman and Chief Executive Officer of the Pritzker Group, which manages the various Pritzker family business assets, and the Executive Chairman of the Hyatt Hotels Corporation...
) and real estate investor Alvin Dworman, who ran Superior from his New York office after Pritzker's death in 1997. The Pritzkers and Dworman bought the failed Lyons Federal for the relatively modest price of $42.5 million, with each using a shell corporation to control half of Coast-to-Coast Financial Corporation (CCFC), a holding company created to own Superior.
July 2001 collapse
According to a press release from the Office of Thrift SupervisionOffice of Thrift Supervision
The Office of Thrift Supervision was a United States federal agency under the Department of the Treasury that charters, supervises, and regulates all federally- and state-chartered savings banks and savings and loans associations. It was created in 1989 as a renamed version of another federal agency...
,
George Kaufman, a finance professor at Loyola University Chicago called Superior's failure "a tale of gross mismanagement," adding that
"[Superior] was engaged in relatively unethical practices, fancy-footwork accounting, playing it very close to the edge."
Kaufman says many share in the blame for the mess-the bank's managers, directors, and auditors, as well as banking regulators-but he also wonders how the Pritzkers, as co-owners, could have allowed it to happen. "One of the great mysteries to me is what the Pritzkers were up to, why they took these chances," he said. "It makes no sense given their wealth and visibility."
Settlement by the Pritzkers
In December 2001, the Pritzkers agreed to pay a record $460 million to the federal government to avoid being punished for the failure of Superior Bank FSB.RICO lawsuit
In 2002 uninsured depositors filed federal class-action charges under the RICO ActRacketeer Influenced and Corrupt Organizations Act
The Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act or simply RICO, is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization...
against one-time board chairwoman Penny Pritzker
Penny Pritzker
Penny Sue Pritzker is an American business executive, and a member of the Pritzker family of Chicago, one of America's wealthiest business families...
, her cousin Thomas Pritzker, Dworman, other bank principals and Ernst & Young. Plaintiffs’ attorney Clint Krislov claimed that those who controlled Superior induced depositors to put money in the bank, “corruptly” funneling money out of the bank to “fraudulently” profit the owners.
The lawsuit, Courtney v. Hallerin was an initially filed under a district court which dismissed the claims; the appeal was argued before the 7th Circuit of the United States Court of Appeals
United States Court of Appeals for the Seventh Circuit
The United States Court of Appeals for the Seventh Circuit is a federal court with appellate jurisdiction over the courts in the following districts:* Central District of Illinois* Northern District of Illinois...
on September 25, 2006. In her May 7, 2007 opinion, Judge Wood
Diane Pamela Wood
Diane Pamela Wood is a federal judge on the United States Court of Appeals for the Seventh Circuit, and a Senior Lecturer at the University of Chicago Law School....
affirmed the lower court's decision.